There are times when I'd like to share something with you but my Voice in the Gardensite does not seem the appropriate place, thus, this blog.

There are experiences, thoughts, views... and for anyone lurking/waiting to pounce (as has occurred on several occasions), please do not attempt to turn what I post into a political statement. This is NOT a political site, but IS about occurrences, reality, and personal opinion concerning what I see in the world around me and my family. There are many excellent writers whose works "speak" to me, and I shall include some of them. At times it may be something I think you would enjoy or simply whatever ails you (me).~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.

Friday, March 2, 2012

Is the U.S. really a post-oil economy?One way to gauge the real economy is to look at charts of the GDP, wages,
household debt and the price of oil; another way is to correlate all of these
on one chart. The following chart (courtesy of frequent contributor B.C.)
plots these four metrics thusly:
GDP/(wages/household debt)/price of oil.
What pops out of the chart is what happens when oil spikes higher or declines. In 1973,
the first oil shock sent the economy off a cliff.
Conversely, when oil fell to $12/barrel in the late 1990s while wages were rising
strongly, the plotline peaked, reflecting a strong economy.
In 2008, oil spiked to $140/barrel in 2008, household debt reached record heights
and wages began stagnating, and the economy fell into a sharp recession. When oil plummeted
back to $40/barrel in early 2009, the plotline spiked up.
When oil prices and household debt are high while wages stagnate or decline,
the economy sinks to recessionary levels.
Here are B.C.'s observations:

This chart utterly discredits the economics profession and those who claim that
the post-industrial economy ("deindustrialization" and "financialization") is not
oil-constrained and the service economy is what the rest of the world should adopt
as the normative standard at $100+/barrel oil.

The current plotline is hovering just above the recessionary levels of late 2008. Does
this reflect a strong economy, or one that is weak? If oil keeps climbing,
what will that do to a visibly weak economy?
The Bulls are convinced that the U.S. has decoupled from the rest of the world and
from the price of oil. This chart makes the opposite case: the price of oil matters,
especially when wages are declining and household debt is elevated.